MPs' pay rises to £74,000 — but they must explain why they're worth it

MPs should be given a large salary increase of around 10 per cent but be
forced to submit an “annual report” to show what they have done and achieved
during the year, the Independent Parliamentary Standards Authority has said.

Members of Parliament are facing public outcry after it was announced that they are in line for a pay hike of around 10 per cent to £74,000 - while the rest of the country continues to suffer austerity measures.

It comes despite the independent regulator admitting that there is “no evidence” that the current level of pay has affected the quality of candidates standing for Parliament.

The taxpayer will be hit with a £4.6 million bill for the increase which will take effect after the general election in 2015.

However, the Independent Parliamentary Standards Authority (Ipsa) also proposed to offset the costs with curbs to pensions, expenses for dinners, TV licences, taxis, and "golden goodbyes".

It insisted that the overall burden on the taxpayer will only go up by £500,000 when the package comes into force.

MPs will also be forced to submit an “annual report” to show what the have done and achieved during the year.

Ipsa justified the salary increase despite saying that it had not “been persuaded” that the “quality of those offering themselves as prospective candidates has been adversely affected by the level of pay available”.

The report added: “We have found no evidence to support this claim and, indeed, there is plenty of reason to suspect that the selection policies and procedures of the political parties are far more important determinants of the quality and character of prospective candidates.

“Moreover, many informed observers seem to judge the 2010 cohort of MPs to be of a particularly high calibre. And, of course, they put themselves forward for election with a salary of £65,738 in view.”

Sir Ian Kennedy, the chairman of Ipsa, said the salary increase is “fair” and that it would bring pay for MPs to the “right” level.

"This package ends the historic peculiarities that have grown up around MPs' pay, and sets MPs' pensions on a sustainable footing for the future," he said.

"The current pension scheme is unaffordable over the long term; the resettlement grants - which, until Ipsa came in, were worth up to £65,000 and available for all - have had their day. We are recommending a modern, professional approach which also means refining the rules on expenses and business costs to rule out MPs claiming for an evening meal.

"It is clear from our work talking to the public over the last 18 months that people do not know what their MPs do. Clearly, that is damaging for our Parliament and has to be addressed. And so we are proposing the introduction of an annual report by MPs. "The aim is to have as transparent a system as possible. The public will know what MPs get for their costs and expenses, their salaries and pensions, and what they have done.

"I recognise some will just concentrate on the salary, rather than the package as a whole, and say it's too high; others that it's too low. There is no easy way forward on this. We have put together a package of reform which we think is fair and which ends the anomalies of the past.

"The recommendations Ipsa is proposing have a net cost of £500,000 a year."

The regulator said the total cost of remuneration and expenses for MPs was now £7 million less in real terms than in 2008-09 - although that was before the expenses scandal that rocked Parliament and sent claims plummeting.

"This means that our solution to the problem of MPs pay and expenses - the problem we were created to fix - is £7 million a year cheaper than the regime we inherited," Sir Ian said.

Under the shake-up, the current salary of £66,396 will rise to £74,000 in May 2015, at a cost of £4.6 million once extra national insurance contributions are taken into account

From then wages will rise annually in line with average UK earnings, a mechanism the regulator hopes will ensure the situation is resolved for the long term.

The existing final salary pension scheme will be downgraded to career average - as happened across the rest of the public sector some years ago.

Benefits will accrue at 1/51 of salary per year, rather than 1/40. But they will have to contribute less - 9.2 per cent of salary instead of 13.75 per cent - and the retirement age will be the same as for the state pension.

Death in service benefits will also be reduced from four and a quarter times salary to twice salary, and widows will be entitled to less.

In total the pension changes will save £2.5 million in the first year, according to Ipsa.

The old pre-2010 "resettlement grants" of up to £65,000 for departing MPs, even if they stood down voluntarily, will not be brought back.

In 2015 there will be interim arrangements of up to £33,000 for those who lose an election, but by 2020 defeated politicians will only be entitled to two weeks' pay for every year of service if they are under 41, and three weeks if they are older - similar to redundancy terms in the rest of the public sector.

The £15 expenses available for dinner when the House sits beyond 7.30pm will be scrapped, and there will be tighter rules on using taxis and hotels.

There will also be a crackdown on claims for running second homes, with costs of TV licences and contents insurance no longer being met.

The expenses tweaks will save £178,000 in 2015, Ipsa said.

The proposals will go out for consultation before Ipsa finalises the arrangements in the autumn. Party leaders have signalled alarm at the prospect of a pay rise above the 1 per cent cap imposed on the public sector for 2015-16 - but it would require a change in the law to prevent the regulator pushing it through.

Ed Miliband, the Labour leader, said the proposals should not go ahead "in the current economic circumstances".

"Whatever the overall nature of the package, and it is a package of measures, I think when ordinary people, ordinary working people are going through such difficult times, I don't think it’s right that MPs should be getting this scale of pay rise," he said.

He added: "If this was to go ahead I wouldn't be accepting this pay rise but I don't think it is going to go ahead in the current circumstances because I think that when IPSA consult the public, the public will be pretty clear that while the difficulties we have in the economy persist we can't have MPs getting a 10 per cent pay rise.”